Have you ever had an interaction with a company that merited special consideration? What happens to a company when they have the right policy in place but make the wrong decision? Here is a recent example: http://overheadbin.msnbc.msn.com/_news/2012/04/25/11392324-dying-veteran-protests-spirit-airlines-no-refund-policy?chromedomain=usnews&lite
As detailed by this story, a terminally ill veteran was denied a refund by Spirit Air Lines. Why? In an effort to keep costs low, Spirit does not offer refunds. Why is this the right policy but wrong decision in this case?
The analysis of this airline ticket example is essential to understanding when and where to make exceptions to your refund policies. The paper “Refundability and Price: Empirical Analysis on the Airline Industry” by Seong man Moon & Makoto Watanabe of Sogang University is the seminal work in this field. The conclusion of the research is that the premium is paid for a refundable ticket is directly correlates with the distance of travel. This tells us that a long flight such as the one between Florida and New York (1010 miles) can turns out to be the most significant determinant of the relative price between refundable and non-refundable tickets. However if you look at a flight between Los Angeles and Las Vegas (236 miles) the difference in ticket price between refundable and non-refundable is negligible as the customer has the option of making the five hour drive.
So how can you as an entrepreneur use the sophisticated pricing model of the airline industry to deliver better customer service?
1. Understand the nature of the product or service you deliver. If you provide a time sensitive or essential service such as critical health care or something that is difficult for the customer to substitute, this calls for strong scenario analysis planning. Be prepared to make exceptions and deal with customers on a case by case basis even though you may have a sound structure of customer policies. The potential cost of bad publicity is significant especially when a remedy only takes a little compassion and extra effort.
2. If you are selling easily substitutable products like apple pie and lemonade be prepared to offer customer service that rivals Zappos. Make sure your customers walk away with a positive memorable experience even if you have to give out an extra cup of lemonade.
3. Empower employees to use creativity to solve problems. Great Customer service pays off. Reflecting on the Spirit Airlines example, how much money was saved by not refunding the ticket $500-1000? Now if just one or two people choose another airline over Spirit due to the bad publicity, this business decision will result in a potential loss.
Making exceptions to rules or policies makes for remarkable customer service. Happy customers lead to profitability. Just ask Steve Jobs or Tony Hseih of Zappos why exceeding customer expectations is important. Both of these men created considerable wealth and loyal customers–something I know you are also capable of.
A few weeks ago on a Sunday night I was traveling through Penn Station in New York City. After getting off the 1 train from the upper west side, I needed to connect to New Jersey Transit for a train to Newark and my eventual destination. After a day full of meetings, my head was throbbing and I set off to buy a bottle of cold water as an attempt to relieve the pounding. If you have visited Penn Station you probably know there is a Duane Reed drugstore with a great location that is always very busy. I had about ten minutes before my train departed for New Jersey and I went to get some water. As I entered Duane Reed, the lines at checkout were long but if they moved quickly, I could get my water and catch the train in time. Bottle of water in hand I got in line anxious to check out as the time was ticking down for my departing train. It was 6:47 pm and my train was scheduled to depart at 6:53 when it was my turn to check out. As I was checking out I noticed my bottle of water was frozen. Opening this bottle would not only cause it to explode and get me wet but the water was not immediately drinkable since most of it was frozen. The whole time I was waiting in line, the Duane Reed “shift manager” was chatting up the cashier slowing her down. As I realized this bottle of water wasn’t going to work and since the shift manager was sitting by idly, I asked him if he would get a bottle of water for me that wasn’t frozen. He promptly replied that “he was not my slave and I could get my own water and get back in line”. All I wanted was a bottle of water for the train ride back to Newark. I wasn’t advocating ownership of humans as property nor did I think the request of an idle employee was over burdensome. With that kind of response, I left the store and bought water from the deli next door (albeit at an increased price relative to Duane Reed). What the Duane Reed shift manager failed to realize was that our interaction was taped on their security system and I am a persistent person that doesn’t tolerate mediocre or poor customer service. The next day while on the train to another meeting, I called the store manager at Duane Reed and let him know of the incident. He said he would check into it and get back to me. Within ten minutes my phone rang and an embarrassed apologetic Duane Reed manager stated that he had watched the video tape and he had no excuse for how his employee acted. He offered to personally deliver a $25 American Express Gift Card to me if I was in the area and he asked that I not hold a grudge against his store or Duane Reed. This was true redemption. I told the manager I was on the train and I live out-of-town. He offered to put the gift card in an envelope and personally mail the gift card to me. Additionally in the future anytime I am in Penn Station, he asked me to come by the store and ask for him personally. Two days later I received the American Express gift card mailed to my home in Skokie. The ownership and responsibility the Duane Reed manager took for his employee’s indiscretion are admirable but even better he worked hard and convinced me that he really cared about the way I felt. Take a lesson from a Duane Reed manager and take negative customer experience and use it as an opportunity to build trust. My first stop in Penn Station on my next trip to New York will be Duane Reed looking for this store manager that understands what customers want.
Please share how you enhance your customer’s experience with your company.
Until next time, be good and cultivate your community of friends.